self directed ira for real estate

Investing In Real Estate With Your IRA

As you know, real estate is at a 30 year low right now in many markets. Recently all over Wall Street Journal, New York Times, and countless other publications there have been stories about big Wall Street companies jumping in and buying real estate rather than stocks… because they know they can get a better return.

So, why are most Americans still trusting their own retirements… IRAs… 401ks… with the stock market?

Answer is, they don’t know any better.

Before we dive into the good stuff… remember, we are not financial advisors and by no means should this guide be meant to act as financial, tax, or legal advice. It’s for informational purposes only. Consult your own professional advisors before you make any financial choices like this.

The Self-Directed IRA for Real Estate

There’s something called a Self-Directed IRA. They’ve been around for a while… and in the past several years lots of people have realized that their IRAs aren’t earning them a darn thing (sometimes even losing money). So, those people (maybe this is you) have started to look for other ways to earn better returns with that same IRA.

Enter the “self-directed IRA”.

A self-directed IRA is simple. It’s a retirement account that has the same tax benefits as a normal IRA… but, you have more flexibility in deciding what you want your IRA to be invested in.

You can invest in…

  • Real estate (commercial, income generating rental property, rehabs, etc.)
  • Promissory Notes secured by mortgages (i.e. – private lending)
  • Tax lien certificates
  • Limited partnerships
  • LLC’s
  • Sub-C corporations
  • Real estate options
  • Some types of precious metals
  • … and the normal investments like stocks that your normal IRA can invest in

Basically, this opens it up so you can buy investment real estate with your IRA… or be a private lender in real estate.

Are There Restrictions?

Yes, there definitely are. There are restrictions on what you do with the real estate if you buy and hold… what types of precious metals… and often times the “custodian” of the SDIRA has restrictions on what they think you can and should invest in.

A custodian? Whats that?

Great questions.

Self-Directed IRA Custodians

The US Government created the SD-IRA loophole to help investors take more control over their investments while at the same time still getting the tax benefits. But, at the same time… they don’t want people setting up these SD-IRAs and just doing whatever they want.

So there is a barrier that they have to have in place… and thats the custodian.

The custodian is usually the Self-Directed IRA company who you have your IRA with. They act as the “go between” when you’re going to make an investment. Many custodians have guidelines on what you can invest in, how long it will take for you to actually make your money work for you once they approve the investment… etc. Some custodians are more passive… and let you actually have a checkbook where you can write checks from your SD-IRA to make investments.

You should do your homework and find the custodian thats right for you. Here’s a few that we know and respect:

Do some research to find the right fit for you.

Some have more expensive fees than others… and some give more flexibility than others.

Exploring Your Options: Questions to Ask Before Partnering with a Self-Directed IRA Company

When it comes to choosing a Self-Directed IRA (SD-IRA) company, making informed decisions is paramount. Before you embark on this financial journey, consider posing some essential questions to potential service providers.

1. What are your fees, and how do they work?

Fees within the SD-IRA landscape can vary significantly. Some companies charge an annual fee based on your account’s value, while others impose an annual fee or hefty setup fees. It’s crucial to understand these fee structures to determine what aligns with your financial goals. Remember that the ability to invest in real estate with your IRA can often result in higher returns, potentially offsetting the fees incurred.

2. What’s the investment approval process like?

The time it takes to fund an investment can differ widely among SD-IRA companies. Some may require up to 30 days or more for approval and funding. However, some SD-IRAs offer “true checkbook control,” providing you with a checkbook to access your IRA funds instantly. This feature can be invaluable when you need to close a deal promptly. While checkbook control may come with slightly higher setup costs, it’s essential to assess what suits your investment needs best.

3. Are there any restrictions on investment choices?

Before proceeding, ensure that your chosen SD-IRA allows the types of investments you’re interested in, such as real estate and private loans. Some larger, more traditional SD-IRAs from institutions like Schwab and SmithBarney may impose limitations on the investment options available within your account. Always clarify these restrictions before making your decision.

4. Is my retirement account eligible for rollover into a SD-IRA?

Not all retirement accounts are eligible for rollover into a self-directed IRA. Most traditional IRAs are eligible, and even some 401(k) plans may qualify. Consult your financial advisor and engage with the SD-IRA company’s representative to confirm eligibility and explore the possibilities.

5. How long will it take to have my account ready for investment?

Procrastination can be a hindrance to your investment goals. If you’re eager to use your IRA for real estate investments, initiate the rollover process promptly. Some SD-IRA companies may take weeks, or even longer, to complete the setup of your account, making it crucial not to delay. By starting early, you ensure your funds are readily available when you spot that perfect real estate opportunity.

Taking Action and Maximizing Your Investment Potential

If you believe a self-directed IRA is the right avenue to invest a portion of your retirement savings in assets you understand, rather than relying solely on the unpredictable stock market, it’s time to take the plunge. Educate yourself about the pros and cons of SD-IRAs to make well-informed decisions. To kickstart your journey, explore the wealth of resources available online, such as the websites mentioned above, which offer comprehensive insights into self-directed IRAs and how they can empower you to invest in real estate wisely. Your financial future awaits your thoughtful exploration and strategic planning.

If you have any questions on how you can work with us as an investor… just connect w/ us through our contact form or call us anytime at: (321) 379-5777. We offer discount investment properties in Central Florida and surrounding areas to investors like you who often buy them and keep them as rentals. Also, for those qualified investors who want to explore private lending… contact us and we’ll talk about how we work with private lenders as well.

Happy investing! We’re here as a resource for you so don’t hesitate to connect with us anytime.